What Does Pending Mean in Real Estate? Housing Terms Defined
When a home is pending, it means the would-be buyer has made an offer, and the seller has accepted their offer. It also means that the sale, unless something happens, will go through. The only step left is moving through the escrow steps and the final paperwork. As with almost everything in life, there’s always a chance that something happens, the pending status changes, and the house becomes available again.
You likely have more questions about other real estate terms and whether there’s any chance of buying a house already in pending status. Read on to get the answers to all your questions and other valuable real estate data below!
Can a Pending Sale Go Back on the Market?
Although the buyer and seller have come to an agreement when there’s a pending sale on a home or property, it’s possible for the home to go back on the market. Below are several of the most common reasons why a pending real estate transaction can fall through.
The Buyer Cancels
When a home sale is pending, a buyer will put up a deposit to ensure that the seller doesn’t go with another buyer. In many cases, that will prevent the buyer from canceling, but occasionally, it still happens. For example, the buyer might decide the home is no longer a fit for their budget.
The buyer might also have a change in their lifestyle, decide to relocate to another area, or have some other reason for backing out. Yes, they will lose their deposit, but it’s not unheard of for a buyer to walk away from a pending home sale. When they do, the home will go back on the market.
The Short Sale Falls Through
In real estate, a short sale is when a homeowner, for some reason, is financially distressed and is allowed by their lender to sell their home for less money than they owe the lender and avoid foreclosure. However, the lender must agree with the buyer’s short sale offer price. If they don’t, the pending deal will fall through. At that point, the home will go back on the market.
The Home Inspection Shows Major Issues
Pending real estate deals are sometimes made before the home being sold has been inspected. This is often the case in a contingency sale and is one of the major contingencies.
Suppose a licensed home inspector determines that the home needs significant repairs or upgrades or determines that something else is unfavorable. In that case, the pending sale will fall through, and the house, as you might have already guessed, will go back on the market.
The Loan Falls Through
To proceed with a home sale, a lender must put the buyer’s loan through their underwriting process. Sometimes, the lender can deny their loan even if a buyer is pre-approved and the sale is pending. Without it, the buyer would have no alternative but to cancel the sale, and the home would then be available to another buyer.
How Many Pending Home Sales Fall Through?
According to Trulia, the online real estate marketplace, a tiny percentage of pending home sales fall through. For example, based on the latest comprehensive numbers from 2016, only 3.9% of pending home sales fell through. That was an increase from 2015 when 2.1% of pending sales fell through. In other words, it’s relatively rare for a pending home sale to fall through, but occasionally, it does happen.
What’s the Difference Between a Pending Sale and a Contingent Sale?
While a pending sale and a contingent sale are similar, there are a few subtle differences between the two. Yes, both pending and contingent sales indicate that the seller has accepted an offer from the buyer. However, with a contingent sale status, the seller keeps their listing active because there are one or more contingencies that the prospective buyer must meet before they can purchase the property. This could include paying for a home inspector, replacing the gutters, or installing a new roof.
On the other hand, when a home is being sold in pending status, all contingencies that the buyer has indicated have been satisfied by the seller. The sale will go through if no other issues arise (as seen above). The seller will not actively list the property during this time.
How Long does a Pending Sale Take?
Typically, when a house is in pending status, it takes less than a week to be sold. That’s because once the contract is pending, the final stages of the sale are the only ones that need to be completed. Unlike a home sale under contingency, a pending home sale means all the contingencies have been met, and the buyer and seller are ready to close. Usually, this includes paperwork that title companies and attorneys need to conclude.
How Is Pending Different from Under Contract?
The terms “pending contract” and “under contract” are more or less interchangeable in the real estate industry. For example, if a home is marked as “pending,” all contingencies have been met by the seller, and the property is “under contract.”
Can you Make an Offer on a Pending Sale?
In most cases where a home sale is pending, the seller will not be able to accept an offer from another buyer. One reason is that most buyers’ contracts don’t have what’s known as a kick-out clause. A kick-out clause, which is good for the seller, means the seller Is allowed to continue showing their home and accepting offers on it even after it’s in pending status.
If you were to find a home where the seller has a kick-out clause, you could make an offer on the house because the clause would allow the seller to accept your offer as a contingency. Some kick-out clauses even allow the seller to reject the offer on a pending sale from one buyer and accept a new one from another buyer, which could be better for the buyer. Most real estate experts would recommend that a buyer has no kick-out clause in their contract, but they would also recommend that a seller include it.
Can a Real Estate Agent Show You a Home with a Pending Contract?
Even though a home sale might be in pending status, it still isn’t a completed sale, and, in theory, a real estate agent could still show you the property, especially if the seller included a kick-out clause in the contract. However, most real estate agents would not show you a home with a pending contract without the kick-out clause because it would be considered inappropriate. Plus, without a kick-out clause in place, the seller would be legally discouraged from allowing another interested party to see their home.
What Are the Different Statuses the MLA Puts on a Home for Sale?
If you’ve never bought or sold a home, you might not know about the multiple listing service, aka MLS. The MLS is a database with all the properties, including homes, that are being sold in a particular geographical location. Once a home is put on to the database, which happens when the homeowner lists their house, the MLS will give that house a status.
Pending means that all contingencies stipulated in the contract have been met by the seller, including any necessary changes to the home. It is possible for a pending sale to fall through, but as we’ve seen today, this only happens to a very small percentage of homes with pending status. If you’re selling your home or buying one, best of luck getting a fair deal and a home that serves you well for many years.
Featured Image Credit: RODNAE Productions, Pexels